Boeing Capital, Black Hills sell bonds, tone stagnant; spreads tighten, Black Hills gains

By Andrea Heisinger and Paul Deckelman

New York, Oct. 22 - Boeing Capital Corp. and Black Hills Power, Inc. were the lone issuers in an otherwise sleepy Thursday.

Boeing was the marquee name of the day, offering $1 billion of senior notes in five- and 10-year tranches. The deal was evenly split between the two maturities and was launched and priced by mid-afternoon.

Black Hills Power did a significantly smaller sale of first mortgage bonds totaling $180 million. The offering of 30-year notes was sold by early afternoon.

There is "a possibility of a couple of deals," for Friday, a market source said. Many issuers are likely waiting for the coming week, he added.

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 13 North American high-grade index was 3 basis points tighter versus Wednesday's level, at a mid bid-asked spread level of 99 bps.

Advancing issues moved ahead of decliners, though only by a small margin - a few dozen issues out of the more than 3,600 tracked.

Overall market activity, reflected in dollar-volume totals, was down nearly 14% from Wednesday's pace.

Spreads in general were seen tighter, in line with mostly higher Treasury yields; for instance, the yield on the benchmark 10-year notes widened by 3 bps on Thursday to 3.39%.

Both issues of Boeing Capital's new bonds did not venture far from the spread levels versus comparable Treasurys at which the two-tranche deal had priced.

Black Hills Power, on the other hand, did firm from its pricing level.

Boeing Capital offers $1 billion

Boeing Capital, the commercial financing arm of aircraft and aerospace company Boeing Co., sold $1 billion of senior notes evenly split into two tranches.

The $500 million of 3.25% five-year notes priced at Treasuries plus 95 bps.

A $500 million tranche of 4.7% 10-year notes priced at a spread of 130 bps over Treasuries.

Both tranches sold in line with price guidance. It was in the 95 bps area, plus or minus 5 bps, the informed source said. Talk on the 30-year notes was in the 130 bps area, plus or minus 5 bps.

There was "a lot of interest" in the bonds, the source said.

Credit Suisse Securities, Goldman Sachs & Co. and J.P. Morgan Securities were bookrunners.

Proceeds will be used for general corporate purposes, including debt repayment, equipment purchase for leases, loans and for funding other investments.

The issuer is based in Renton, Wash.

Primary tone unchanged

There was "not much change" in the tone of the investment-grade primary market by late in the day, a syndicate source who worked on one of the offerings said.

"Really, it's been kind of the same all week," she said. "There wasn't really much [news] today, either way."

The Boeing sale was the most watched of the couple that priced. "They're a good name," a source away from the deal said. "Any time you have an A [rated] name, investors notice."

Not much in the way of issuance is expected for Friday, but the coming week has potential to be busier, sources said. There could be more from the emerging markets and overseas sectors.

"They [EM names] kind of have a lock on the market," the syndicate source said.

Black Hills sells mortgage bonds

Electric company Black Hills Power priced $180 million of 6.125% 30-year first mortgage bonds early in the day at Treasuries plus 187.5 bps.

RBC Capital Markets, RBS Securities and Scotia Capital ran the books.

The company is using $103.3 million of the securities to pay an outstanding amount under a utility money pool agreement, $27 million to pay a share of the remaining construction costs for the Wygen III power plant, and $30 million to repay 8.06% first mortgage bonds due in February, 2010.

The subsidiary of Black Hills Corp. is based in Rapid City, S.D.

Boeing bonds grounded

When the new Boeing Capital dual-tranche issue was freed for secondary dealings, trades saw little or no real spread movement from the levels at which those bonds had priced earlier in the session.

A trader saw the financing company's $500 million of 3.25% notes due 2014 at 91 bid, 88 offered, just in slightly from the 95 bps over level at which the bonds had priced.

On the other hand, Boeing's $500 million of 4.70% due 2019 were seen straddling their 130 bps par pricing level, a trader quoting them at 133 bps bid, 128 bps offered.

Another trader saw the five-year piece at 95 bps bid, 85 bps offered, while the 10-year was at 132 bps bid, 128 bps offered

Black Hills powers up

The day's other new deal, Black Hills Power's $180 million of 6.125% 30-year mortgage bonds "came at the lower end of price talk" suggesting a spread as wide as 200 bps over Treasuries, a trader said, and firmed slightly from there to about 184 bps bid, versus the 187.5 bps over level at which the bonds had priced.

Another trader quoted the bonds having come in a little to 180 bps bid, 175 bps offered.

Dow firmer on numbers

There was busy activity in Dow Chemical Co. bonds after the Midland, Mich.-based manufacturer posted better quarterly numbers.

A trader saw Dow's 8.55% notes due 2019 - one of the day's busiest high-grade issues, with over $50 million traded - "a little tighter" than Wednesday's levels in a 307-309 bps context. Thursday saw a level of 304 bps bid, 300 bps offered.

Dow's 9.40% bonds due 2039 moved down to the low 50s from 307-310 bps earlier, while the company's 5.90% notes due 2015 tightened to around the 256-257 level - in from size trades at 270 bps over earlier in the week

Dow posted a quarterly profit of $711 million, or 63 cents a share, up from $428 million, or 46 cents a share, a year ago.

Results in the latest quarter were helped by cost cutting and asset sales, offsetting a decline in revenue from slumping chemical prices.

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